From This Associated Press story that we found in the International Herald Tribune, we hear from a couple who used microcredit to begin a business.
When Amy Sokoloff and John Powell were trying to start their art restoration business in New York City, they needed some working capital. But banks weren't willing to take a chance on them.
Sokoloff and Powell ended up on the doorstep of ACCION USA, a not-for-profit group patterned after the Third World microfinance institutions best known for providing money to Moroccan farmers for breeding chickens or to Bangladeshi women for weaving supplies.
The $15,000 loan they got in 2005_ which they paid back in two years — got them the sunlit studio where their Chelsea Restoration Associates brings aged, damaged oil paintings back to life. Last fall, after the U.S. recession began to cut into their business, they went back to ACCION USA for a $25,000 loan, "a tremendous help for cash flow" with an affordable 10.9 percent interest rate, Sokoloff said.
Sokoloff and Powell are among thousands of Americans using microcredit, a financing system originated in the Third World, to help open small businesses or get through rough spots. While the dollar amounts are much bigger in the U.S. than the tiny loans in developing countries — some for less than $10 — the principle is the same: a financial stake that lets people in need better their lives.
Now, with the recession deepening, U.S.-based microlenders say they are seeing an increase in inquiries from would-be borrowers, including startup entrepreneurs seen as too risky by banks and other traditional lenders.
And the still-small U.S. microcredit sector hopes for a boost from the new administration of President Barack Obama.
Obama's secretary of state, Hillary Clinton, is a big supporter of microfinance, praising it during her confirmation hearing for its ability to "raise standards of living and transform local economies" overseas. Obama also has a personal link to the industry because his late mother, Ann Dunham, was involved in microfinance in Indonesia.
These connections gave raised hopes among microloan advocates that some money from the administration's $787 billion economic rescue package will filter into their programs. U.S. microlenders already get support from the Small Business Administration and a Treasury community development fund.
"We're hoping for more funding" from government, said Wendy K. Baumann, vice chairman of the Association for Enterprise Opportunity, an advocacy group for microfinance based in Arlington, Virginia.
Microloans have been made in developing countries for more than 30 years. Bangladeshi economist Mohammed Yunis made the first one of about $27 from his own pocket to 42 women hoping to buy bamboo to make furniture. He later formed the Grameen Bank, which is now one of the world's largest microlenders and shared the 2006 Nobel Peace Prize with the founder.